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Kellogg cuts long-term outlook on sluggish cereal, snack sales
February 12, 2015 / 1:42 PM / 3 years ago

Kellogg cuts long-term outlook on sluggish cereal, snack sales

Boxes of Kellogg's cereal are stacked in a supermarket in New York in this April 29, 2008 file photo.Lucas Jackson/Files

(Reuters) - Kellogg Co (K.N), the world's largest maker of breakfast cereals, cut its forecast for long-term annual revenue growth as consumers shift away from cereals and snacks to cheaper private label foods and cook more at home.

The Corn Flakes and Rice Krispies maker's shares fell as much as 5 percent to $62.81 in early trading.

A long-term target of low-single digit annual revenue growth for cereals and snacks was "realistic and achievable," Chief Executive John Bryant said on a conference call.

The company, which reported lower-than-expected sales in the fourth quarter, cut its outlook for long-term adjusted annual revenue growth to 1-3 percent from 3-4 percent.

Kellogg forecast flat adjusted net sales for 2015. It expects adjusted earnings to be flat or down 2 percent, excluding the impact of foreign exchange.

Cereals and other processed foods from Kellogg, ConAgra Foods Inc (CAG.N) and General Mills Inc (GIS.N) are facing stiff competition from breakfast options such as yogurt and frozen egg sandwiches and cheaper private-label brands.

Adjusted net sales fell 5.7 percent in its U.S. morning foods business and 2.4 percent in the U.S. snacks business, its biggest, in 2014.

The company also expects a challenging macroeconomic environment in 2015 due to the stronger dollar, Chief Financial Officer Ronald Dissinger said on the call.

Sales outside North America accounted for 34.5 percent of net sales in the quarter ended Jan. 3.

Adjusted net sales in the U.S. morning foods business, which includes cereal, fell 7.7 percent in the quarter.

Sales in U.S. snacks also fell 3.1 percent, excluding items.

Net loss attributable to Kellogg was $293 million, or 82 cents per share, compared with a profit of $818 million, or $2.24 per share, a year earlier.

The latest quarter included a non-cash mark-to-market adjustment of $822 million, driven mainly by changes in interest rates on pension plans.

Excluding items, the company earned 86 cents per share.

Net sales inched up 0.4 percent to $3.51 billion but still fell short of analysts' average estimate of $3.65 billion, according to Thomson Reuters I/B/E/S.

Up to Wednesday's close, shares have risen about 12 percent in the last 12 months.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D'Souza and Don Sebastian

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